Climate Change And Carbon Credits: Sorting Out The Confusion

Source: University of Illinois Extension Farm Gate | Jul 16, 2009

The U.S. House of Representatives narrowly approved legislation addressing climate change and sent it to the Senate, where supporters hope the fall will bring restrictions or costs for releasing carbon dioxide and other greenhouse gases into the atmosphere. The public is divided on the issue of global warming, responsibility for greenhouse gases and what should be done and by who. Agriculture currently is one of the major stakeholders in the debate, and can come out either in good shape or bad.

The definition of good shape or bad shape is offered by Luther Tweeten as either mitigating or adapting. Tweeten is the emeritus chairman of the Ohio State University Department of Agricultural Economics and in a recent perspective does not tell government what do to, but says whatever the choice of government may be, it will have an impact on agriculture. He cites the Intergovernmental Committee on Climate Change, which reports average temperatures are rising, with food production gradually shifting away from tropical and subtropical regions and more into Canada and Siberia over the next century. Because of high populations in the developing countries in Africa and Latin America, Tweeten says such a shift will create hardships among the world’s food insecure people.

Tweeten readily says the science of global warming is unsettled, and scientists cannot agree among themselves. But he says global warming is an unintended consequence of producing energy with the use of fossil fuels that release carbon dioxide and methane into the atmosphere and that traps heat from the sun. While society may suffer the consequences, the market must send the proper signals for efficient resource allocation and private costs must be paid to match the cost to society. He says governments are in control, but the constituents of policy makers are less than enthusiastic about paying more taxes and energy costs to correct any damage. And he adds that greenhouse gases do not stop at the borders of an individual country.

To mitigate greenhouse gases, Tweeten says one solution is to impose a $26/ton tax at a coal mine or oil well that is designed to offset the $26 cost/ton of carbon dioxide that society has to pay. While no one wants the cost of energy to rise, Tweeten says a cap and trade policy is becoming a popular alternative that would allow heavy energy users to pay for a permit to emit more than their share of greenhouse gases. Following the issuance of permits by governments, a market would develop for the trading of them. But he says the purpose would be to raise the cost of carbon-based fuels to the point that alternative source of energy would be preferred.

Tweeten says agriculture would have a difficult time slowing the momentum, because food production accounts for only 13% of manmade sources of greenhouse gases, and biofuels contribute only minor positive results in the limitation of greenhouse gases. He says a gallon of ethanol requires nearly a gallon of fossil fuel equivalent in the form of motor fuel, fertilizer, pesticides, transportation and processing. However, he says agriculture would have a modest role by supplying only 300 million tons of carbon credits, which means one ton of carbon stored in the soil for perpetuity. He calculates a farmer could break even by spending up to $1.30/acre annually to retain the carbon, but would lose money if he has to sacrifice more than ½ bu. of corn to hold or sequester the carbon. He says that means no-till production can be the most profitable enterprise, but then again, it requires more carbon-based chemicals to control weeds.

Farmers would have the option of selling their carbon capture enterprise to industry, but the result would be minimal compared to the overall cost. Tweeten says authorities project a $50 billion cost to control the climate in the year 2035, but carbon credits sold by farmers for $26/ton would net agriculture only $390 million. While that is only the U.S., Tweeten says the world’s nations acting individually would be too small to have any positive impact, and many times they have other priorities, such as poverty, disease, conflict or food insecurity. He suggests the adoption of wide-ranging policies that would include development of crop genetics to resist drought and heat stress, better infrastructure for moving crops from production to consumption areas and high-yield crops that will minimize crop area to allow expansion of forests that do a better job of holding on to carbon dioxide.

Summary: Although there is considerable controversy about global warming, there is public policy momentum to seek changes that would mitigate any rise in temperature due to the burning of fossil fuels that create carbon dioxide and methane. Agriculture cannot do much to reduce emissions of those gases, and even biofuels require fossil fuels for production, refining, and transportation. Agriculture may be able to lend its capacity to retain carbon in the soil by selling carbon credits from no-till agriculture to industries that emit more than their share of carbon dioxide. Such a program may seem significant, but may also be overshadowed other initiatives, such as improved crop genetics for drought resistance and better movement of food from areas of high production to areas of high consumption.